Called to account

We're not shy when it comes to shopping around for car insurance, switching to a cheaper power supplier or moving our mortgage, but millions of us turn a blind eye to the gains we could be making by changing our bank.

More than 17m people have switched their gas or electricity supplier since deregulation, the majority of Britain's 30 million motorists shop around to some extent when renewing their car insurance, and recent figures show homeowners are switching to more competitive mortgages in record numbers.

But while the numbers of people ditching their bank and moving their current account to another provider are increasing, those making the move are still very much in the minority. Research from Consumers' Association magazine Which? a few months ago found that 23m people "have never considered switching banks".

However, could this be the year that current account switching really takes off in a big way? On these pages we examine the deals on offer and battle our way through the small print in an attempt to highlight the best accounts.

In the past couple of months we have seen Abbey National and Halifax - two of those aiming to break the Big Four banks' stranglehold on the current account market - wheel out the heavy artillery in the form of high-profile TV adverts promoting their offerings.

The Abbey ad features former soap star Martin Kemp and a promise that if it can't better or match your existing current account's in-credit interest rate, it will give you £50. The Halifax, meanwhile, is using a cartoon version of singing bank employee Howard Brown to push its message that it is paying 30 times more interest than some of its rivals.

Now Lloyds TSB has hit back by upping its maximum in-credit interest rate to an almost table-topping 3.15%. It is promoting this with a multi-million pound marketing campaign including TV ads showing its iconic black horses stampeding through towns and cities.

Meanwhile, new rules came into force this month aimed at making it easier for people to switch their current accounts. Under the revised banking code, a customer's old bank must now provide his or her new bank with information on their direct debits and standing orders within five working days (three days from August 1) of being asked to do this. And these changes are backed by a pledge to waive any bank charges incurred as a result of any mistake or unnecessary delay by the bank or building society concerned.

These new rules should help reassure those people who like the idea of moving their current account but are holding back because they are worried something will go wrong. That, along with a perception that it's a hugely time-consuming hassle, are two of the main reasons why many people have stayed where they are, even if they are not particularly happy with the rates and service. However, the evidence suggests the vast majority of people don't experience problems - one survey found that 73% of those who had switched found it easy to do so. And the introduction in 2001 of an automated system to swap customer information between banks has increased the ease with which customers can move. Many of the banks will do all the legwork for you, including contacting your employer to transfer your salary, and some such as the Halifax enable customers to track where they are in the switching process.

The Consumers' Association would certainly be delighted if we saw an explosion in the numbers moving their accounts - it says millions of us are getting "a bad deal" and receiving a miserly 0.1% interest on our cash when we could be getting 3%-plus. Which? has set up a website - www.switchwithwhich.co.uk - to help people thinking of switching to find the best account for their circumstances.

So, should you switch? And who's offering the best rates? The answer to the first question depends on how happy you are with the service you are getting from your current bank. For some, a long-standing good relationship and the convenience of a branch up the road may count for more than a higher interest rate.

Several of the banks' offers have small print attached, making it very difficult to compare the various offers and conclusively identify "the best deal".

Currently topping the Moneyfacts best buys table is Cahoot, which is paying 3.3% gross (3.4% if you forgo a chequebook). Cahoot also comes out best in our table, notching up both the highest amount of interest paid out on a balance of £1,500 and the lowest total cost incurred by someone who is permanently £500 overdrawn. But it is an internet bank and that won't suit everyone. Smile, Intelligent Finance, Halifax and Abbey National are all paying 3%, though with the last two you have to pay £1,000 or more into the account each month.

Lloyds says its 3.15% rate, available to both new and existing customers, is "the best on the high street" but there are a number of catches. To get this, you have to pay at least £2,000 in each month (in other words, be earning at least £32,500 a year) and log on to its internet banking service at least six times every three months. If you pay in £1,000-£1,999 a month the rate falls to 2.5%, and any balance above £5,000 only earns 0.1%.

If you regularly go overdrawn you may want to switch to an institution offering a lower authorised overdraft rate. Alliance & Leicester recently slashed its Premier account authorised and unauthorised rate to a "best buy" 6.9% (0% for the first 12 months) - this compares to NatWest's 17.8% rate.

Barclays, one of those paying most of its current account customers 0.1%, defends its position by saying it offers its customers "overall value," while fellow 0.1% payer Royal Bank of Scotland says research shows that "accessibility and quality of service is twice as important as credit or overdraft interest rates for customers".

While you can save as much as £100-£200 a month by moving your mortgage, it's certainly fair to say that most people probably aren't going to make or save a packet as a result of changing their bank. If you take home about £18,000 a year and you've usually spent all your salary by the end of the month, moving from a bank paying 0.1% interest to one paying 3% would result in you being about £20 a year better off - that's less than £2 a month. But for higher earners who always have a fair bit in their accounts, the amounts will be a lot bigger.

Also, it's not always plain sailing, even if the switch-over is problem-free. David Russell, 65, of Brighton, opened an Alliance & Leicester Premier current account last summer after 45 years with Lloyds to take advantage of its best buy in-credit interest rate. So the retired lecturer wasn't best pleased when A&L last month slashed the rate from 3.1% to 2.1%. He feels he has been the victim of a "recruit then reduce" strategy.

But he's still getting 20 times more interest than millions of people.

So, you should be asking yourself a current affairs question: if your bank is paying you a pittance, and perhaps isn't even giving you good service, why stick with it?

How to make the move to a new bank

Once you've decided which bank or building society you want to switch to, ask for the necessary forms. The bank will probably ask for ID and details of your income, plus any mortgages, loans and credit cards that you are paying off.

Many banks have dedicated switcher teams that will manage the process and do all the hard work for you.

Once you've been accepted, you will be asked to sign a mandate allowing the new bank to ask your old bank for details of your direct debits and standing orders. Your new bank will then contact all those companies that you pay by direct debit to ask them to take payments from the new account. When that's been sorted out, your new bank will cancel the obsolete payments at your old bank.

The new bank may also offer to contact those organisations that make regular payments into your account, such as your employer, to inform them of the new account details.

"Because the transfer of all payments can take several weeks, it is important that you keep an eye on both accounts while the switch is in progress," says Which? on its www.switchwithwhich.co.uk website.

It's probably wise to keep some money in your old account in case the message hasn't got through to everyone and a company tries to take money from that one instead of the new account. Don't close your old account until everything is done and dusted.

Switchback ride that went so smoothly

Robert Shepherd is a happy switcher. He moved his current account from Lloyds TSB to the Halifax a year ago and says it all went very smoothly.

"People said, 'Bet you had loads of hassle.' But I can't really praise them [Halifax] enough. Everything was taken care of for me," he adds.

Mr Shepherd, 65, had been with Lloyds for about 20 years, and says he "didn't really have any beef with them". He decided to make the move after seeing the TV ads featuring singing Halifax employee Howard Brown extolling the virtues of its current account.

"It was the 30 times more interest that really attracted me. Also, they had this dedicated changeover team - they really looked after everything. I thought I'd have to do all the direct debit notifications but it was all handled on my behalf. Even my employer was notified," says Mr Shepherd, who lives in Worthing, West Sussex, and who retired at Christmas.

It took about five or six weeks for his account to be fully switched over, and he was offered a temporary interest-free overdraft facility during the transfer.

"I would recommend them to anyone that is thinking of switching," he says.